It's Moment of Truth Time, Microsoft

It's Moment of Truth Time, Microsoft

Next week, Microsoft will hold its annual TechEd conference in New Orleans, the first time the software giant has hosted a major event in the city since the Katrina disaster. I'm excited to return to New Orleans for a number of reasons, and of course I expect some interesting news and information around Windows Server 2008 R2 Service Pack 1 and other Microsoft products. But as you may have noticed from my past few commentaries, I've gotten caught up in competitive issues lately. And some events of the past several days have only reinforced this emphasis.

First, Robbie Bach and J Allard were forced out of Microsoft. It's possible you're not all that familiar with these people, who reigned over Microsoft's Entertainment & Devices division. Suffice to say they're directly responsible for the software giant's failure in the consumer electronics market over the past decade. In fact, their actions and decisions are so suspect that analyst Rob Enderle actually suggested they might have been competitive plants, a "fifth column" put in place by Apple, Google, or others to undermine Microsoft from within.

That's fanciful, and hilarious, but I think the truth is a bit more pedestrian. Bach and Allard may have been inept, but they weren't plants. What I really have to wonder about is the management team that allowed these two to continually chip away at Microsoft's credibility and influence in what is inarguably the biggest growth market in the technology industry, that serving consumers. Between the Zune (~0 percent market share), the Xbox 360 (billions in R&D flushed down the toilet, a $1.2 billion recall that is the worst in consumer electronics history), Windows Mobile (worst year-over-year market share drop in the smart phone industry, absolutely clueless response to the iPhone), and their other lackluster products, Bach and Allard did more to hurt Microsoft than its competitors ever did. It's no coincidence that these two were bounced out of Redmond in the same week that Apple surpassed Microsoft as the biggest technology company, as measured by market capitalization.

(For the record, the official story is that Bach and Allard left Microsoft of their own free will. It's hard to imagine this being the case, given the circumstances.)

Second, Apple has now sold two million of its iPad slate devices. And if it hasn't done so already, you have to think Apple will sometime this year sell more iPads than every single Tablet PC ever sold, combined. Almost a decade after Microsoft began its expensive and time consuming effort to add Tablet PC functionality to Windows, the software giant has little to show for it. Yes, the technology has improved steadily. And yes, there are Tablet PC capabilities available in a variety of form factors, including some interesting multi-touch-compatible desktop PCs. Big deal. You could count the number of Tablet PC-savvy apps on one hand, and aside from some niche markets, none of these computers have generated any market interest at all.

Compare this to the iPad, which on paper looks like a cute little plaything, not a new market in the making. But Apple is now selling these devices at the rate of 750,000 per month. Developers have already created over 5,000 iPad-specific apps, and the devices also run most of the 200,000+ available iPhone/iPod touch apps. Remember, platforms matter. The iPad is very quickly becoming such a platform.

Microsoft's response to the iPad has been predictably lacking, just as the company reacted slowly and poorly to such competitive threats as the iPod, the iPhone, Android, and the Nintendo Wii. In January, Microsoft touted a number of Windows 7-based, iPad-like "Slate PC" designs from companies like HP. None have yet appeared in the market, and reports suggest part of the reason is that preproduction models garner barely half the battery life of the iPad. A decade later and the PC industry still hasn't solved this very basic problem. And why is Microsoft still trying to re-launch the Tablet PC? It seems like every couple of years, the company tries again.

Microsoft, it's time to look in the mirror and realize that no one wants your Tablet PC, and that no one--aside from hard core gamers--is particularly interested in your vision for consumer computing. What they want is the iPad, or another device entirely. And as I noted last week in Three Screams and a Clod, some of the competing products from companies like Google are addressing actual limitations in Apple's gear rather than trying to simply provide solution that ape the market leader and add complexity. They're gaining traction where Microsoft hasn't.

What's most amazing about this, perhaps, is that a 2007 video recently resurfaced in which both Microsoft cofounder Bill Gates and Apple CEO Steve Jobs were asked about the future of computing. Jobs talked of the resiliency of the PC and noted that they would be augmented by "post-PC" devices like the iPod. But Gates was even more specific, basically describing Apple's current-day product line-up three years ago. "I don't think you'll have one device," he said. "I think you'll have a full screen that that you'll carry around, and you'll do dramatically more reading on that. I believe in the tablet form factor ... and then you'll have something that fits in your pocket. At home, you have your living room, with your ten foot experience ... And then in your [home office], you'll have something that looks a lot like your desk at work."

I can't believe I'm even thinking along these lines, but maybe Microsoft needs to bring back Bill Gates. The company that makes the products he was describing three years ago now leads the technology market. And for the first time in decades, it's not Microsoft.

An edited version of this article appeared in the June 1, 2010 issue of Windows IT Pro UPDATE. --Paul

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